''Property prices are surging," shouted the headline, but tell that to Gary of Tauranga.

Gary, who asked that his surname be kept private, rang in one day to complain about that very headline.

Prices were certainly not surging where he was.

The local economy, heavily dependent on the kiwifruit industry, was faring badly from the impact of the Psa virus. Coastal properties near his house had been selling at huge discounts.

Nearby houses previously valued at $3.4 million had started to sell for $2.2m.

"It just shows you, no-one's got any money," he said.

However, Gary's complaint may soon be rendered invalid.

Nationally, house prices have risen 8.7 per cent in the last year, according to the Real Estate Institute's most careful measure, the stratified median house price index.

And economists believe there's evidence this Auckland and Christchurch-dominated price hike is starting to filter down to other regions.

After a severe hangover courtesy of the global financial crisis, Auckland house prices have rocketed 15 per cent in the last year, a result of under-supply and natural population growth.

Earthquake damage has raised prices in the Christchurch market nearly as much, by 13 per cent.

But outside those two cities, price growth has been a lot more modest, roughly 5 per cent.

It's also notable that although construction is on the road to recovery, house sales are still constrained, just three-quarters of the peak they hit in April 2007.

So are we in a bubble? ASB economist Nick Tuffley says no, at least not in the sense that people are speculating on when the cycle will peak.

"I don't think we're in that territory," he says.

Yet in political circles, the "b-word" has been used by no less than the International Monetary Fund, which believes New Zealand house prices are overvalued by 25 per cent.

Credit ratings agency Fitch, the OECD, the Reserve Bank and Finance Minister Bill English have also warned that Auckland's house prices are putting the nation's banking system at risk.

A little hindsight is useful at times like these. David Tripe, a Massey University banking and housing expert, says people don't realise that prices have been averaging 10 per cent annually for the last 30 years.

"Despite all the noise, we haven't actually seen huge house price rises, even in Auckland."

What is of concern is not so much the level of house prices but our level of debt, Tripe says.

An affordable house was once three times the average Kiwi household income; now in the major centres, it's five to six times that ratio.

But then, holding down a mortgage has never been easy.

"If you went back 20 years, that ratio was significantly lower, but on the other hand, interest rates were a whole lot higher."

The problem with today's buyers, says John McDonagh, associate professor of property studies at Lincoln University, is that no-one remembers when the last housing bubble burst.

"That happened in the late 1970s, but few people noticed because it was masked by rampant inflation.

"Many New Zealanders have therefore come to think that house prices never go down, at least for long. People overseas don't suffer the same delusion."

However, McDonagh notes that New Zealand is in a low interest-low inflation environment, very different from the last crash.

So it's the potential to borrow too much when interest rates are so low that is causing all the fuss.

Of course, house prices have gone down, even in the recent past.

They lost about 10 per cent following the global financial crisis.

But nearly six years later the housing market has all but clawed back its losses.

Most economists agree this latest rebound started out as a shortage of supply.

In fact, it was the fact we were under-supplied that shielded us from the type of housing crashes that occurred in Ireland and the United States when the global financial crisis struck, according to BNZ chief economist Tony Alexander.

He's picking that prices will keep rising for at least another three years until supply starts to catch up. But that does not constitute a bubble.

"It's not a bubble as yet because over the past three years, household debt in New Zealand overall has only risen 7.6 per cent.

"So it's not a speculative debt-fuelled surge in the housing market that's under way. It's also not a migration-driven thing. The migration numbers are only now starting to move into interesting territory."

What he does believe is that the Auckland and Christchurch housing stocks are being "repriced" in the face of the lowest level of interest rates since the 1960s.

That effect will spread once people move out in search of cheaper housing, he believes.

"Our biggest and second biggest cities are undergoing this housing phenomena. You can't write it off as something special; it will spread to the rest of the country."

Dominick Stephens, of Westpac, has a slightly different take. For him, the shortage explanation for rising house prices "just doesn't stack up".

"I do think shortage played a role in the early stages of the upturn. But really a market that's driven by housing shortages looks like the market in Christchurch now.

"Rents have risen 16 per cent while house prices have risen 12. Clearly if there's a physical shortage of houses on the ground, you should see rents moving.

"That's not what we saw last decade and it's not what we're seeing in Auckland now."

Whatever the reasons for the housing comeback, Tuffley and Stephens believe people will feel differently when interest rates - and mortgage repayments - start to rise.

"House prices are being pushed up by temporary factors and I think those factors are not going to stick around forever. I'm forecasting a reduction in house prices," says Stephens.

Seasoned investor and author Martin Hawes also urges caution. "Property values do fall. It's a market like any other."

He looks at Ireland, where property prices boomed until 2006 but are now half their peak price due to a troubled banking system that became reluctant to lend.

Hawes believes there's only so far New Zealand house prices can really run, thanks to a one-off structural change that is unlikely to be replicated.

Houses that used to be maintained on one person's salary are only still affordable because most families have both partners working, he says.

"I would argue that's a one-off hit."

History suggests to Hawes that should property prices start to fall, it will be more likely to be like a tyre with a slow leak, than a sudden traumatic event.

When the property market hits trouble, Kiwis simply refuse to sell.

"They just fold their arms and say, ‘That's ridiculous, I'm not going to take that price', and withdraw their property from the market."

McDonagh also champions the slow leak theory, purely from the political perspective.

No government wants to have the property market fall on their watch, he muses.

"It surprises me that they've taken so long to say what they've said."